The UK gas system had a comfortable day during yesterday's session thanks to lower demand and higher pipeline supply - which led to lower storage withdrawals. As a result of this, we saw a considerable drop in European spot prices. Today's UK NTS gas demand should be lower than yesterday's levels, and March prices could see a drop at some point given the improvement in pipeline flows this morning. Turning to European power, the French market should see its noose loosen in the coming days thanks to an increase in temperatures and strong supplies from nuclear facilities as well as run-of-river hydro production. Germany's low renewable production should limit the potential fall in spot prices.
How did the energy markets close?
At yesterday's open, gas managed to make some gains on the back of forecasted colder weather, but slipped down as the day ended. Day-Ahead ended trading at 72.5ppt while S-13 and W-13 dropped around 0.25ppt on the back of Brent's downward movement. After its one-year high, Day-Ahead power opened lower yesterday before closing up at £57/MWh ahead of forecasted colder weather. The far curve saw a few falls, as seasonal contracts followed their gas counterparts.
How did the energy markets open?
On opening, Day-Ahead gas dropped 2.5ppt day-on-day - starting trading at 70.00ppt. This drop could be down to an oversupplied market ahead of an expected rise in continental flows to the UK. Power's Day-Ahead dropped £3.25/MWh to open at £53.75/MWh on the back of evidence that more gas has been made available for power generation.
1-year forward prices
Following the spike in prices, 1-year forward prices for business gas and power dropped back a little yesterday; now trading at 68.35ppt and £52.30 respectively. This drop can be seen in the graph below.
Latest Brent Crude Oil prices
Further sell-off in the oil complex took its toll yesterday, dragging Brent 1st-nearby down to $112.41/bbl (at its lowest level). We saw a slight spike in prices ahead of US economic data and Bernanke's speech - but despite the positive data on US equity markets, crude prices ended the day on a low. Our focus continues to bear down on Italian election results. Elsewhere, we'll be keeping an eye on US spending cuts; US durable goods orders; the sale of Italian bonds; Eurozone money supply and the weekly EIA report. Note: Brent Crude prices are taken from opening market data, and do not represent the price as it changes throughout the day.